Supreme Court: Dream 11 Fantasy Games Are Skill-based, GST at 18%

The Supreme Court affirmed that online fantasy sports games offered on Dream 11 platform are games of skill, not gambling, protected under Article 19(1)(g) of the Constitution. The court referenced previous judgments supporting this conclusion. Regarding GST classification, the court deferred to GST authorities, noting that Dream 11 correctly classified its services under the applicable entry attracting 18% GST. The court dismissed the PIL, finding it lacked merit and genuine public interest, and imposed costs on the petitioner.

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Issues Involved:
1. Whether online fantasy sports games offered on Dream 11 platform are "gambling/betting"Rs.
2. Whether Dream 11 is wrongly classifying its virtual online games under the wrong entry for GST and, therefore, violating Rule 31(A)(3) of the CGST Rules, 2018 in order to evade GSTRs.

Issue-wise Detailed Analysis:

1. Whether online fantasy sports games offered on Dream 11 platform are "gambling/betting"Rs.

The petitioner alleged that Dream 11's platform constitutes "betting" on cricket teams and that online fantasy sports games are games of chance, thus constituting illegal gambling. However, the court referenced multiple judgments to determine the nature of Dream 11's games. The Punjab & Haryana High Court in Varun Gumber Vs. Union Territory of Chandigarh (2017) and the Bombay High Court in Gurdeep Singh Sachar Vs. Union of India (2019) had previously held that the fantasy games offered by Dream 11 are games of mere skill and not gambling. The Supreme Court dismissed the Special Leave Petition against the Punjab & Haryana High Court’s judgment, affirming that fantasy games are protected under Article 19(1)(g) of the Constitution of India.

The court reiterated that the test for gambling is whether the result of the game is determined by chance or accident. The Supreme Court has consistently held that games of skill are distinct from gambling and are protected under Article 19(1)(g). The court highlighted that Dream 11's fantasy games involve substantial skill, judgment, and discretion in selecting virtual teams, which are influenced by real-world player performance and statistics. Thus, the court concluded that Dream 11's fantasy games are games of skill, not chance, and do not constitute gambling or betting.

2. Whether Dream 11 is wrongly classifying its virtual online games under the wrong entry for GST and, therefore, violating Rule 31(A)(3) of the CGST Rules, 2018 in order to evade GSTRs.

The petitioner argued that Dream 11 is evading GST by paying 18% instead of 28% on the amount retained as platform fees, alleging that GST should be paid on the entire amount received from participants. The court noted that the Bombay High Court had already addressed this issue, holding that Dream 11 correctly classifies its services under entry 998439, which attracts 18% GST, and not under entry 999692, which pertains to online gambling services.

The court acknowledged that the GST Department had issued a show cause notice to Dream 11, but it noted that the Department itself had classified Dream 11's games as games of skill. The Supreme Court had also limited the scope of review to the GST issue, which is pending before the Bombay High Court. Therefore, the court decided to leave the GST classification issue to the GST authorities to determine in accordance with the law.

Conclusion:

The court dismissed the PIL, finding no merit in the allegations. It held that Dream 11's fantasy games are games of skill and not gambling/betting, thus enjoying protection under Article 19(1)(g) of the Constitution. The issue of GST classification was left to the GST authorities to address. The court also noted that the PIL lacked genuine public interest and was filed without proper research, dismissing it with costs.

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